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Accounts Payable Best Practices

Michael Casuccio, ITSMichelle McGinty, Kennesaw State University

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Agenda

• Best Business Practices– Approvals– Internal Controls– Invoices– Stipends– Petty Cash– Vendors

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Agenda

• GeorgiaFIRST Financials – PeopleSoft– Vendor settings– Invoices and Voucher processing– Payments and Paycycles

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Approvals

• Accountability, Authorization and Approval• Department Table is used to determine who has

authority to approve expenditures for the department.• Project Table is used to determine who has authority to

approve expenditures for the project.• Other approvals include:

» ITS for computer purchases» Asset Management» Audio Visual Equipment» Hazardous Materials» Human Resources (on-payroll, qualified Independent

Contractor status)

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Controls in Place?

• The Controller approves payments over $5,000 and payments to individuals.

• Consultant, Lecturer (Speaker) and Performance Agreements have standard templates which are approved by Legal. The routing form allows all departments to view the agreements before they are paid.

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Other Controls

• Employees are never paid as a consultant, speaker or for services through AP. This must be reviewed by HR and the payment must go through Payroll.

• Anyone, who was on payroll, needs to be paid consistently on payroll. This includes student assistants who are paid a stipend for additional work on campus.

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Stipends/Sponsored Funds

• Stipends should include timesheets for dates worked.

• Consultant or Contractors on Sponsored Fund agreements must include a statement of work and resume of the consultant/contractor.

• Stipends for work performed are taxable.

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Valid Invoice?

• Best Practice: valid invoice (not a quote)

• Duplicate Invoice Checking– Set up Financial/Supply Chain– Business Unit Related– Payable/Payable Options– Vouchering Options 2 – Duplicate Invoice Checking• Invoice Number, Business Unit, Vendor ID

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No Invoice Number?

• Establish procedures for recording invoice numbers.

• No invoice number? – Identify a method that will allow the ERP system to

capture duplicate payments.– Travel: first day of travel + letter for multiples

MMDDYY or MMDDYYA or MMDDYY-1– Utility/Cell Phone Invoices: account number + date– Service Contracts: date of service MMDDYY.

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Where Do Your Invoices Go?

• Best practice: have all invoices directed to Accounts Payable.

• Purchase Order should specify remit address for invoices.

• Statements should come to Accounts Payable to verify there are no outstanding invoices.

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Petty Cash

• No Student payments from petty cash.

• No independent contractor for services.

• Receipts must be attached.

• Sales Tax is not reimbursed.

• Flyers and list of attendees are required.

• Compliance with food policy.

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Vendor Maintenance

• Separation of Duties. The employee who maintains the vendor files should not be able to process vouchers or issue purchase orders.

• W-9 should be required.

• Only one vendor per W-9/FEI number. Use remit to address to handle different payment addresses.

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Vendor – Legal Status

• Corporate Vendors: Verify legal status at: http://www.coordinatedlegal.com/SecretaryOfState.html

• If status is Active/Compliant or Active/Noncompliant - continue processing

• If Admin. Dissolved, follow up with campus contact.

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International Vendors

• W-9 - applies to US Citizens/Permanent Resident only.

• W8BEN and Foreign National Information Form with copies of requested immigration documents.

• KSU uses the name “*****” five stars in the name2 field on the vendor master page.

• Query: 430_AP_VERIFY_INTL_VENDOR

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Vendor Location

From PeopleBooks:

• It is Not a physical address.

• It is a default set of rules, or attributes.

• Defines how you conduct business with a

particular vendor.

• There can be multiple ‘locations’ for each vendor.

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Peoplesoft Vendor Options

• Vendor/Location/Options “Payables”• Payment Control• Matching/Approval Options• EFT Options• Fund Transfer Details• Vendor Banking Account Options• Vendor Type Options – EMP for Employee?• Location Main? Your remit to address?

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Payables Default Hierarchy

Business UnitOrigin

Control Group

Vendor

Voucher

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Peoplesoft Vendor – Cont.

• Identifying Information• Duplicate Invoice Indicator. KSU uses “Default”• Withholding Vendor? • Persistence

– Regular– One Time – Only one payment is generated and then the system will “I”

inactivate the vendor ID. Good for International Vendors and one-time payments.

– Single Pay – Good for refunds where AP has the control to add the vendor’s address/name. Strong Internal Controls should be used with this option. No 1099 reportable payments.

• Contacts• Description ACH/EFT.. Use Email ID for Remit to information.

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1099 Reportable

• 1099 reportable activity accounts:• 7278%, 719xxx, 7481xx, 751xxx

– Royalties– Rental of Non-Real Estate– Real Estate Rental– Per Diem & Fees – Expense (not reimbursed expenses)

» Architect, Attorney, Consultant, Engineer, Physician, Interpreters, Veterinarian, Speaker, IT Consultant,

» 752100 for Reimbursed Expenses to Consultants should be used or Non-Employee expense account 65XXXX.

• International Vendors 1042s

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Internal Control Practices

• Separation of Duties (should not be performed by Accounts Payable)• Approve purchase (Budget Manager)• Receive ordered materials • Approve invoice for payment• Review and reconcile financial records. This means

that the person who can print the check should not be the one reconciling the bank account.

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Match receipts to Invoices

• All PO invoices must have some sort of receiving notification. – This may be as simple as an email from the end

user who says the product was received.

• Issue Payment/Check Request is based on an assumption that the product was received by the end user.

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Automatic Three Way Matching

• Purchase Order must be set to Receiving Required.

• Match the invoice by copying in the purchase order.

• Match exceptions will occur when there is no open receiver for the purchaser order.

• Assets must be copied in from a receipt.

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Matching Process

Setting Matching

PO: Do Not Receive or Optional 2-way matchingCompares voucher to PO

PO: Receiving Required 3-way matchingCompares voucher - PO - Receipt

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Matching Exceptions

• PeopleBooks Note: – Organizations typically correct a problem instead

of overriding it. In general, it is best to rectify and reprocess incorrect associations and vendor differences rather than override them.

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Match Exceptions

• Query to identify Match Exceptions– BOR_AP_UNPOSTED_VCHR– Matching Workbench

• What are common Match Exceptions– Missing Receiving– PO set at “Receiving Required” in error.– Receiving not equal to PO amount/Qty.

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Document Tolerance

• Allowable difference between a PO and Voucher

• Percentage or Amount• Default setting by business unit– The lesser of $500 or 10%

• Can be changed on the PO distrib lines

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To Finalize or Not

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To Finalize or Not

• What does it do?– Finalizes the predecessor PO line– Final liquidation of the KK distribution line

• Advantages:– Eliminates the need to run PO reconciliation

process to determine the closing of a PO or PO line

– Quickly frees up funds.

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To Finalize or Not

• When to use it:– Vouchering the last invoice for a PO or PO line but

the amount or quantity is less than the original

• When not to use it:– If you are fully vouchering a PO or PO line• PO Close process will finalize the PO or PO line

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To Finalize or Not

• Example:

* Not necessary if you run PO close.

PO Prior Invoices Final Invoice Finalize ?

$100 $0 $90 Yes

$100 $100 No*

$100 $80 $20 No*

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Distribution Lines

• PO vs Voucher• Changes:– Do NOT Change PO lines that that have been

vouchered.– Changing Distribution lines– If receipts exits, the receipt must be changed, too.

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Voucher Post

• Can not post vouchers– Verify Control Group settings– Verify Voucher Attributes Tab on the voucher

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Voucher Upload Process

• Voucher Upload Spreadsheet – Large volume, low dollar payments to multiple

vendors. – One-to-one distributions such as stipends, board

checks or UPS.

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Payment Method

• Payment Method linked with Banking Information and Pay Cycles.– MAN - Manual payments keyed such as wires,

direct debits from the bank are keyed using the “Manual” payment process.

– ACH (Commercial / Business)– EFT (Personal)– CHK

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ACH / EFT

• New to ACH/EFT? – Contact ITS for instructions to get started

• See Job Aid: RUNNING EFT/ACH PAY CYCLES

• Payment Advices

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ACH / EFT

• PRENOTING– What is it?– Changing the default # of wait days– Run an ACH / EFT pay cycle to trigger the prenotes– Or Manually Confirm

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Pay Cycle Monitoring

• Trial Register– Vendor Name/Address matches invoice.– Dollar amount matches invoice.– Invoice number keyed correctly.

• Trial Register verified to Detailed Check Register – Performed by individual who does not have

vouchering/payment security (outside AP area).

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• Check the Pay Cycle Exceptions

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Payment Selection Criteria

• Credit Vouchers– Example: voucher $80 and credit vchr $100– Option: Process When DRs >= CRs• Nothing happens because debits are not greater than

credits

– Option: Process Credit Vouchers• Voucher paid / zero $ payment row / accounting entries• Credit / payment row $80 / remaining $20

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Positive Payment

• Notifies bank of checks that will be presented for payment.

• Contact ITS for assistance in getting started

• Review Wimba presentation.

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Positive Payment

• Note the pay cycle ID you are using: POSPY1-9

• Verify that you POSPY# runs to completion

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Positive Payment

GeorgiaFIRST Training Archives• Wimba Session:

Using Positive Payment, August 31 2010 – Archive:

http://gbor.wimba.com/launcher.cgi?room=PSFIN_TRNG_2010_0831_1430_53

– Slides and Handout

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Month End Close

• Run Query: BOR_AP_UNPOSTED_VCHR • Run Query: BOR_AP_UNPOSTED_PYMNTS• Reconciling the Open Payables to the General

Ledger.– Aging Payables Report vs. 211000 GL Account– Reconciling Items• Match Exceptions• Un-posted Voucher• Budget Exceptions

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Training Resource

GeorgiaFIRST Training Archives – http://www.usg.edu/gafirst-fin/training/archives/

Wimba Session: Using the PO Workbench and Monthly PO Cleanup Processes, March 23 2010 – Archive:

http://67.202.210.69/launcher.cgi?room=PSFIN_TRNG_2010_0323_1430_53 – Slides and Handouts

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Training Resource

GeorgiaFIRST Training Archives – http://www.usg.edu/gafirst-fin/training/archives/

• Wimba Session: Using Positive Payment, August 31 2010 – Archive:

http://gbor.wimba.com/launcher.cgi?room=PSFIN_TRNG_2010_0831_1430_53

– Slides and Handout

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Documentationhttp://www.usg.edu/gafirst-fin/documentation/job_aids/category/accounts_payable/